Shree Ram Metal Industries vs. The Principal Commisisoner Of Central Tax & Ors.

Held

The Court held that the Petitioner's payment of the tax amount along with interest in August 2022, in response to summons issued on July 6, 2022, was made under Section 73(5) of the Act. However, the subsequent demand-cum-SCN was issued under Section 74(1) of the Act on June 7, 2024. The Court noted the fundamental difference between Section 74(5) and Section 74(8). Section 74(5) allows payment of tax, interest, and 15% penalty before the notice is served, leading to no further notice. Section 74(8) allows payment of tax, interest, and 25% penalty within 30 days of the notice, deeming proceedings concluded. The Court found that even considering the entire amount and penalty, the penalty only came to Rs. 19,000/-. To avoid further delay, the Court directed the Petitioner to deposit 15% of the penalty amount within four weeks. Upon such deposit, the impugned order, solely concerning the Petitioner, would be quashed. The Court clarified that this order would not apply to other noticees. The Petitioner was willing to deposit the 15% penalty.

Facts

The Petitioner, Shree Ram Metal Industries, filed a writ petition challenging an Order-in-Original dated January 21, 2025, and a Form DRC-07 dated February 23, 2025, which raised a demand of Rs. 1,32,467/-. The Petitioner contended that they had paid the entire demand in August 2022, prior to the issuance of the show cause notice (SCN) dated June 7, 2024. This payment was evidenced by a letter dated August 31, 2022. The impugned order itself acknowledged a payment of Rs. 2,07,868/- by the Petitioner. The Revenue confirmed the deposit of Rs. 2,07,868/- but argued that a penalty was imposed due to the Petitioner being associated with fake firms. The Petitioner relied on Section 74(5) and Section 74(8) of the CGST Act, 2017, arguing that payment before the SCN precludes further penalty.

Key Issues

1. Whether the Petitioner's payment of the tax amount along with interest in August 2022, prior to the issuance of the show cause notice dated June 7, 2024, under Section 74(1) of the CGST Act, 2017, precludes the imposition of further penalty under Section 74(5) or Section 74(8) of the Act? Petitioner's Arguments: The Petitioner argued that they had paid the entire demand in August 2022, as evidenced by a letter dated August 31, 2022. They relied on Section 74(5) of the CGST Act, 2017, which allows payment of tax and interest along with 15% penalty before the issuance of a notice under Section 74(1), leading to the conclusion of proceedings. They also cited Section 74(8), which allows payment of tax, interest, and 25% penalty within 30 days of the notice to conclude proceedings. Revenue's Arguments: The Revenue confirmed the deposit of Rs. 2,07,868/- by the Petitioner. Their submission indicated that a penalty was imposed upon the Petitioner due to their involvement with 79 fake, non-existent firms, suggesting that the Petitioner's payment did not fully absolve them of liability for penalties.